26 U.S.C. § 103

Interest on State and local bonds

“The amendment made by section 623 of the Tax Reform Act of 1984 [ section 623 of Pub. L. 98–369 , amending this section] shall not apply to any obligation (or series of obligations) issued to refund another tax-exempt IDB to which the amendment made by such section 623 did not apply if—

(a) Exclusion

Except as provided in subsection (b), gross income does not include interest on any State or local bond.

(b) Exceptions

Subsection (a) shall not apply to—

(1) Private activity bond which is not a qualified bond

Any private activity bond which is not a qualified bond (within the meaning of section 141).

(2) Arbitrage bond

Any arbitrage bond (within the meaning of section 148).

(3) Bond not in registered form, etc.

Any bond unless such bond meets the applicable requirements of section 149.

For purposes of this section and part IV—

(1) State or local bond

The term “State or local bond” means an obligation of a State or political subdivision thereof.

(2) State

The term “State” includes the District of Columbia and any possession of the United States.

For purposes of the preceding sentence, the term ‘tax-exempt IDB’ means any industrial development bond (as defined in section 103(b) of the Internal Revenue Code of 1954 [now 1986]) the interest on which is exempt from tax under section 103(a) of such Code. For purposes of paragraph (1), average maturity shall be determined in accordance with subsection (b)(14)(B)(i) of such Code.”

( Aug. 16, 1954, ch. 736 , 68A Stat. 29 ; Pub. L. 90–364, title I, § 107(a) , June 28, 1968 , 82 Stat. 266 ; Pub. L. 90–634, title IV, § 401(a) , Oct. 24, 1968 , 82 Stat. 1349 ; Pub. L. 91–172, title VI, § 601(a) , Dec. 30, 1969 , 83 Stat. 656 ; Pub. L. 92–178, title III, § 315(a) , (b), Dec. 10, 1971 , 85 Stat. 529 ; Pub. L. 94–164, § 7(a) , Dec. 23, 1975 , 89 Stat. 976 ; Pub. L. 94–182, title III, § 301(a) , Dec. 31, 1975 , 89 Stat. 1056 ; Pub. L. 94–455, title XIX , §§ 1901(a)(17), (b)(8)(B), 1906(b)(13)(A), title XXI, §§ 2105(a)–(c), 2137(d), Oct. 4, 1976 , 90 Stat. 1765 , 1766, 1794, 1834, 1902, 1931; Pub. L. 95–339, title II, § 201(a) , Aug. 8, 1978 , 92 Stat. 467 ; Pub. L. 95–600, title III , §§ 331(a), (b), 332(a), 333(a), 334(a), (b), title VII, § 703(j)(1), (q)(1), Nov. 6, 1978 , 92 Stat. 2839–2841 , 2941, 2944; Pub. L. 96–222, title I, § 107(a)(3)(C) , Apr. 1, 1980 , 94 Stat. 223 ; Pub. L. 96–223, title II , §§ 241(a), 242(a), 244(a), Apr. 2, 1980 , 94 Stat. 281 , 283, 286; Pub. L. 96–499, title XI, § 1103 , Dec. 5, 1980 , 94 Stat. 2669 ; Pub. L. 97–34, title VIII , §§ 811(a), (b), 812(a), Aug. 13, 1981 , 95 Stat. 349 , 350; Pub. L. 97–248, title II , §§ 214(a)–(e), 215(a), (b), 217(a)–(d), 219(a), 221(a), (b), (c)(1), title III, § 310(b)(1), (c)(1), (2), Sept. 3, 1982 , 96 Stat. 466–469 , 472–474, 477, 478, 596, 599; Pub. L. 97–424, title V, § 547(a) , Jan. 6, 1983 , 96 Stat. 2199 ; Pub. L. 97–473, title II, § 202(b)(2) , Jan. 14, 1983 , 96 Stat. 2609 ; Pub. L. 98–369, div. A, title IV, § 474(r)(4) , title VI, §§ 621–624(a), (b)(2), (3), 626(a), 627, 628(a), (c)–(e), (g), 630, July 18, 1984 , 98 Stat. 839 , 915–922, 924, 926, 928, 931–933; Pub. L. 99–272, title XIII, § 13209(e) , Apr. 7, 1986 , 100 Stat. 323 ; Pub. L. 99–514, title XIII, § 1301(a) , title XVIII, §§ 1864(a)(1), (b)–(e), 1865(a), 1869(a), (b), 1870, 1871(a)(1), (b), 1899A(2)–(4), Oct. 22, 1986 , 100 Stat. 2602 , 2885, 2886, 2888, 2890, 2891, 2958; Pub. L. 100–647, title I, § 1013(a)(34)(A) , (c)(12)(A), Nov. 10, 1988 , 102 Stat. 3544 , 3547.)